Posted on April 13, 2017
On Tuesday, the Court of Appeals for the District of Columbia vacated EPA’s final rule governing reporting of air releases from animal feeding operations. The Court found that EPA had no statutory authority to exempt AFOs from the reporting regulations.
The decision is also important because it is another in a recent line of cases regarding the extent of agency authority to interpret statutes. The issue was whether EPA had authority to exempt smaller AFOs from reporting requirements, on the ground that it could not:
foresee a situation where [it] would take any future response action as a result of such notification[s].
Although EPA did not explicitly justify its rule on de minimis grounds, the Court understood EPA to be making a de minimis argument and analyzed the rule in that context. The Court concluded that EPA had not justified a de minimis exception, because:
an agency can’t use it to create an exception where application of the literal terms would “provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded by the costs.”
Here, the Court found that there were benefits to requiring reporting without a de minimis exception. That was enough to vacate the rule.
It is worth noting the concurrence from Judge Janice Rogers Brown, who agreed that EPA had overstepped, but was concerned about the panel opinion’s summary of Chevron as being focused on whether the agency’s interpretation is “reasonable.” Stoking the anti-Chevron flames, Judge Brown wrote to make clear that the “reasonableness” inquiry does not apply at step one of Chevron. Ever-vigilant, she wants to be certain that courts do not abdicate their duty to state what the unambiguous language of a statute means.
I don’t have any problem with that. Phase I of Chevron is an important bedrock principle. If there’s no ambiguity, there’s no deference. However, it’s worth noting that Judge Brown also stated that:
an Article III renaissance is emerging against the judicial abdication performed in Chevron’s name.
Notwithstanding the congressional discussion of this issue, I remain skeptical that any such “Article III renaissance” is occurring. One concurrence from one appellate judge who happens to be named Gorsuch does not a renaissance make.
Of course, the really important part of Judge Brown’s concurrence was her citation to Luck Be a Lady, from Guys and Dolls, the greatest musical of all time.
Posted on March 9, 2017
After years of struggling to implement prompt and cost-effective cleanups of sediment sites under the Superfund program, EPA has adopted a new set of tools. This would be a good time for EPA to conduct an unbiased evaluation of whether recent Records of Decision (“ROD”) issued for sediment sites comply with the Office of the Land and Emergency Management (“OLEM”) Directive 9200.1-130(Jan. 9, 2017), and direct the regions to revise RODs where necessary.
For example, Region 10 recently issued its ROD for the Portland Harbor, a complex, multi-party sediment site, which seems out of sync with the new guidance. In particular, Region 10’s use of unachievable cleanup levels for several contaminants of concern, unwarranted assumptions about current and future land uses in certain areas of the site, and failure to properly assess background levels in some instances conflict with the Directive’s recommendations.
In prior posts, I advocated for actions that could help the agency, potentially responsible parties, and the public achieve success in sediment cleanups. In one post, I recommended that Congress eliminate CERCLA’s bar on pre-enforcement review. In another, I advocated for revision of the dispute resolution provisions in the model Administrative Settlement Agreement and Order on Consent (“ASAOC”) to require the selection of a neutral third party to resolve disputes between EPA and ASAOC respondents. The rationale for these earlier recommendations applies equally to this recommendation; each of them is intended to require EPA compliance with its own guidance and sound legal and scientific principles.
In its directive, OLEM identified 11 recommendations “based on current best practices for characterizing sediment sites, evaluating remedial alternatives, and selecting and implementing appropriate response actions.” In particular, OLEM directed the regions to “develop risk reduction expectations that are achievable by the remedial action.” Most sediment RODs fail to comply with this “best practice.” For example, EPA has repeatedly issued RODs that establish action levels that cannot be met using any current or reasonably foreseeable remedial technology, leading to remedies that are unrealistic and unnecessarily costly. This causes potentially responsible parties to resist, resulting in litigation or delays that perhaps could have been avoided.
EPA should apply its directive. It should systematically review each sediment ROD issued in the last several years, determine whether and to what extent the ROD deviates from the OLEM directive, and instruct regional personnel to revise RODs to comply with the directive. This would require a second look at the RODs at, among other sites, the Lower Duwamish Waterway, Portland Harbor, and the lower 8 miles of the Passaic River. Review of these and other RODs might lead to more realistic cleanup decisions, reductions of risks, where necessary, and implementation of feasible remedies.
Posted on November 15, 2016
What will a Trump Presidency mean for environmental law? I’m not sure my crystal ball is better than anyone else’s, but here are a few quick thoughts:
- It’s still going to be difficult to amend the key statutes, unless the GOP goes nuclear with the filibuster rules. I don’t see Clean Air Act amendments happening. Significant amendments might be possible to the Endangered Species Act and Superfund.
- Changing regulations is more difficult than one might think. As has already been noted, the Bush administration did not fare too well with judicial review of its efforts to roll back some Clinton environmental initiatives. For example, I still think that the new ozone standard should survive and I think that courts would take a dim view of EPA efforts to raise it. The Clean Power Plan is another matter. All Trump needs there may be a new Supreme Court Justice.
- The easiest target is executive orders. The social cost of carbon? Toast. Guidance on incorporating climate change into NEPA? Toast.
Trying to keep things light, I’ll close with a summary in haiku, which often takes nature as its subject.
Deep-six the Clean Power Plan
Goodbye to winter
Posted on November 2, 2016
Superfund practitioners have long known that unilateral orders issued by EPA under Section 106(a) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), commonly known as the Superfund statute, can be very potent enforcement tools. Recipients of such orders who “willfully” choose to defy them, “without sufficient cause,” face the prospect of potentially ruinous civil penalties under Section 106(b) and treble damages under Section 107(c)(3). The term “sufficient cause” is not defined in CERCLA and has been subjected to very limited judicial interpretation. Making matters worse, by virtue of Section 113(h), Section 106 order recipients cannot obtain pre-enforcement review of such orders. Instead, they must wait until EPA brings an enforcement action, or one of the other triggers listed in Section 113(h) occurs (while the penalties and treble damages continue to accumulate, for a period which could last for years), before they can obtain a judicial determination of whether or not their defiance was “without sufficient cause.” This enforcement scheme has thus far withstood due process challenges on the ground that no penalties or treble damages can be imposed until there is a court hearing. Waiting for that court hearing can produce extreme apprehension on the part of defiant order recipients.
In United States v. Glatfelter, one of the prodigious number of reported decisions relating to the Lower Fox River Superfund Site, the Court of Appeals for the Seventh Circuit, after concluding that permanent injunctions will not be available to enforce Section 106 unilateral orders, suggested how that apprehension might be relieved:
“Nothing we have said prevents the government from seeking declaratory relief to establish that a PRP lacks sufficient cause for noncompliance, such as the arbitrariness of the selected remedy or a defense to liability.”
This suggestion may trigger a whole new round of litigation regarding Section 106 orders. For instance, does a private litigant enjoy the same right to seek declaratory relief?
Posted on September 2, 2016
Do air emissions of pollutants constitute a “disposal” under the federal hazardous waste laws? The Ninth Circuit said “no” in Pakootas, et al. v. Teck Cominco Metals, Ltd. based upon its reading of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund). The decision both sets important precedent and showcases the judicial process to discern legislative intent when a statute’s plain language is stressed by an unusual fact pattern. If air pollutants can create CERCLA disposals, then emissions from any stationary or mobile source, including animal emissions of methane (which is considered a pollutant subject to CERCLA by EPA), may be the basis of cleanup liability.
The decision involves a smelter located just north of the border with British Columbia. An earlier decision in that case held that a foreign-based facility can be liable under CERCLA for slag discharges into a river running to the United States. Plaintiffs then alleged the facility arranged for disposal by emitting hazardous air contaminants which were carried by the wind and deposited in Washington State. The district court denied a motion to dismiss and certified the matter for immediate appellate review.
Reading the plain language of CERCLA, the Ninth Circuit found that “a reasonable enough construction” of the law would be that the facility “arranged for disposal” of its air pollutants. No legislative history or EPA rules shed light on this subject. However, the Court concluded it was not writing on a blank slate. Noting that CERCLA incorporates the definition of “disposal” from the Resource Conservation and Recovery Act (RCRA), the Court cited its prior decision in Ctr. for Cmty. Action and Envtl. Justice v. BNSF Rwy. Co., which held that diesel particulate emissions “transported by wind and air currents onto the land and water” did not constitute “disposal” of waste within the meaning of RCRA. To be a disposal, the solid or hazardous waste must first be placed into or on any land or water and thereafter be emitted into the air. The Court also cited its en banc decision in Carson Harbor Vill., Ltd. v. Unocal Corp., holding that passive migration was not a disposal under CERCLA.
The Court thereby found that arranging for “disposal” did not include arranging for air “emissions.” This interpretation of “disposal” was largely consistent with CERCLA’s overall statutory scheme. The Court expressed concern that plaintiffs’ more expansive reading would stretch CERCLA liability beyond the bounds of reason. “[I]f ‘aerial depositions’ are accepted as ‘disposals,’” the Court said, “‘disposal’ would be a never-ending process, essentially eliminating the innocent landowner defense.”
The Court did not discuss in detail the statutory interplay with the Clean Air Act, which regulates air emissions under a complex regulatory and permit scheme. Under CERCLA, federally permitted releases are excluded from liability. But because air permits often specify the control equipment parameters rather than an emission limit, a CERCLA plaintiff may allege that the mere existence of a permit does not provide a blanket immunity from liability and the facility would remain liable for any releases that were not expressly permitted, exceeded the limitations of the permit, or occurred at a time when there was no permit. The Court in passing did note its skepticism that the federally permitted “release” exception evidenced any Congressional intent regarding the meaning of “disposal.”
The Ninth Circuit is the highest court to exclude air emissions from the reach of CERCLA and RCRA. The Court’s citation to Carson Harbor does not provide an exact analogy since a passive landowner has not “arranged” for the initial release of hazardous substances, as compared to the smelter operations which result in air emissions. But the Court’s unwillingness to create potentially unlimited CERCLA liability for air emissions is compelling. Under CERCLA, liability is strict, joint and several and retroactive. Air emissions are widely transported and dispersed in relatively small concentrations by large numbers of potential sources, making CERCLA liability findings and allocations difficult if not impossible.
The Court thereby divined Congress’ intent to make CERCLA’s scheme workable, apart from a literal reading of its text. For judges to “repair” statutory language in this way is controversial. The decision is reminiscent of the U.S. Supreme Court holding that the Obama health care plan provides tax credits to millions of people who purchase insurance from a federal marketplace, even though the statute only provides credits for those who purchase from marketplaces “established by the state.” According to Justice Roberts, that was the only way the law would work, and despite the plain wording in the statute, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.” CERCLA also is not a model of clarity, and the Ninth Circuit similarly incorporated practicality as a factor in discerning Congress’ intent to avoid overreaching in assigning liability for the cleanup of toxic chemical releases.
Posted on July 26, 2016
The importance of a thorough technical evaluation of monitored natural attenuation (MNA) at chlorinated solvent and other groundwater-contamination sites cannot be overestimated. Regulatory acceptance of MNA as a preferred remedial alternative can save millions of dollars in response costs compared to common presumptive remedies. Because “active” remediation technologies rarely achieve complete contaminant treatment or removal, MNA is an implicit, if not specifically evaluated, component of most groundwater remedial actions. A proposal to use MNA as the primary cleanup mechanism, however, is often met with resistance from regulators, notwithstanding years of supportive data. Such resistance may be attributable to antiquated agency policies or, perhaps, an inadequate evaluation of evolving MNA science.
The use of MNA at groundwater sites has typically required a showing of a stable or shrinking plume, source control, sustainable natural attenuation conditions, and acceptable risk to health and the environment. Today, mathematical and modeling tools can systematically establish data trends demonstrating that remedial action objectives will be achieved through natural attenuation in a reasonable time frame.
Unfortunately, even if confronted with irrefutable data, many state regulators will reject meaningful consideration of MNA unless the attenuation mechanism can be pigeon-holed into policies that focus on the demonstration and scoring of anaerobic biodegradation conditions at a site. That is because after almost two decades, EPA’s 1998 Technical Protocol for Evaluating Natural Attenuation of Chlorinated Solvents in Ground Water remains the framework for MNA evaluations and decision-making in many states. Because the 1998 Protocol presumed that the primary effective mechanism for natural attenuation was anaerobic biodegradation, the Protocol has unduly restricted state policies for screening and approval of MNA remedial action.
Numerous studies since the publication of the 1998 Protocol, however, have shown that a viable MNA remedial strategy can be supported by attenuation mechanisms other than anaerobic biodegradation These studies have documented other viable contaminant-destructive attenuation mechanisms and evaluation tools, such as aerobic cometabolism enzyme degradation, magnetic susceptibility, compound specific isotope analysis, and improved sampling and modeling techniques. Greater awareness of these scientific developments by regulators and environmental professionals will result in MNA being an increasingly important remedial tool at many groundwater sites.
We have learned the hard way that it’s much more difficult and expensive to clean up sites using default remedies than first thought. Fortunately, it is becoming increasingly apparent that nature has an ability to degrade various chemicals more quickly and effectively than previously believed. Regulatory acceptance should not, and need not, include unreasonable technical hurdles, such as imposing attenuation “causation” requirements that are neither feasible nor necessary to support what cannot be disputed. That a proposed MNA remedy does not neatly fit into the traditional anaerobic degradation box, and cannot with precision be attributed to one or more alternative degradation mechanisms potentially active at a site should not be determinative. At the end of the day, the data don’t lie. The MNA determination ought to begin with, and remain focused on, the empirical data and data trends.
Posted on May 19, 2016
Three companion decisions in Atlantic Richfield Co. v. U.S. et. al., Case No. 1:15-cv-00056, in the U.S. District Court for the District of New Mexico, provide insight on the CERCLA statute of limitations, potential pitfalls in pleading CERCLA claims, and the defense of sovereign immunity by an Indian Pueblo in the context of CERCLA and contract claims. The case remains pending.
In the 1940s, when the war was over, the federal government was in the market for uranium concentrate for bombs, and it encouraged private entities to mine and mill uranium for sale to the government at prices set by the government. Much of the country’s uranium reserves were in the Grants Uranium Belt in western New Mexico, an area that includes the Laguna Pueblo.
Uranium was discovered on Laguna Pueblo lands in 1952, and Anaconda Copper Mining Company entered into mining leases with Laguna, which were approved by the Bureau of Indian Affairs, acting pursuant to its trust responsibility to the Pueblo. Much uranium was mined there from the Jackpile Paguate mine beginning in 1952, and operations continued until 1982. In 1986, the Pueblo and Anaconda’s successor, Atlantic Richfield Co. (“ARCO”), entered into an agreement to terminate the leases and perform remediation. ARCO agreed to pay the Pueblo to perform remediation, and the Pueblo agreed to assume all liability and release ARCO regarding it. The Department of the Interior approved the agreement and, following the preparation of an EIS, BLM and BIA issued a ROD that established requirements for the remediation. ARCO paid $43.6 million to the Pueblo to perform the remediation and release ARCO.
All defendants were involved in varying degrees with the remediation. BIA had responsibility to determine the extent of remediation required and approve key remediation decisions according to a cooperative agreement with the Pueblo. But BIA and the Pueblo saw in ARCO’s $43.6 million payment an economic development opportunity. The Pueblo formed Laguna Construction Company (“LCC”) to conduct the remediation, and BIA ceded certain oversight to the relatively inexperienced LCC as well. Work on the initial remediation ended in 1985. Beginning in 2007 the Pueblo, and then EPA, investigated the adequacy of mine reclamation at the mine site and found problems. In 2012 EPA proposed listing on the NPL, and in 2014 it asserted that ARCO should fund the RI/FS, but EPA has brought no litigation.
ARCO claims that the remediation was mishandled and brought CERCLA claims against the United States, the Pueblo and LCC, seeking cost recovery, contribution, and declaratory relief. The United States moved to dismiss. In detailed decision by Senior United States District Judge, James A. Parker, all of ARCO’s claims against the United States were dismissed. In companion decisions, some claims against the Pueblo and LCC were dismissed and some survived motions to dismiss. Dismissals were based in part on the CERCLA statute of limitations, the court’s determination that the ARCO pleadings were deficient and sovereign immunity.
ARCO sought to recover two categories of response costs: (1) the $43.6 million it paid to the Pueblo in 1986 in exchange for the Pueblo’s agreeing to be responsible for the remediation and to release ARCO from all responsibility for it; and (2) the significant costs ARCO incurred in responding to EPA’s more recent efforts to shift responsibility to ARCO. The Court dismissed ARCO’s claims for cost recovery and contribution for the 1986 settlement payment as time barred. The Court dismissed ARCO’s claim to recover the costs in responding to EPA and associated investigation as inadequately pled to establish that the expenditure constitutes “necessary costs of response.” Claims for contribution under 113(f)(1) (referenced by the court as “post judgment contribution claim”) were dismissed as premature because ARCO had not been sued. Finally, the claims against the United States for declaratory judgement were dismissed; the court ruled that ARCO cannot bring a claim for declaratory relief because it has failed to establish a valid underlying contribution or cost recovery claim.
Claims against the Pueblo and LCC are somewhat more complicated as a result of sovereign immunity defenses they raised. The court considered the sovereign immunity defense asserted by both Laguna Pueblo and LLC, its federally-chartered Tribal Corporation. The Court concluded that both the Pueblo and LCC are entitled to assert sovereign immunity as a bar to ARCO’s CERCLA claims because the language of existing waivers of sovereign immunity was not unequivocal enough to cover CERCLA claims. The Court therefore dismissed those CERCLA claims. However, the court found that the Pueblo and LCC waived sovereign immunity with regard to ARCO’s breach of contract claims. The source of this waiver for the Pueblo is in the 1986 Agreement to Terminate Leases. The court found that this agreement served to waive sovereign immunity from claims brought under that contract. Regarding LCC, the source of the waiver of sovereign immunity for breach of contract claims was in the Articles of Merger associated with the merger of LCC from a New Mexico corporation to a federal LCC formed under 25 USC §477, which may assert sovereign immunity. A motion for reconsideration by LCC is pending.
Although the facts of Atlantic Richfield are unique, its lessons are broader. First, in pleading a CERCLA claim for cost recovery, care should be taken to allege in some detail facts which support all elements of the claim, including facts showing that necessary response costs within CERCLA were incurred. Second, without adequate waiver of sovereign immunity, the settlement and payment in exchange for a release and commitment by a tribe or tribal corporation to assume full responsibility for clean-up may leave the door open for CERCLA liability in the future without recourse through CERCLA-based contribution and cost recovery claims. Finally, although the court’s decision confirmed that the defense of sovereign immunity applies to CERCLA contribution and cost recovery claims brought by private parties against sovereign Indian tribes and their federally chartered corporations, the court’s analysis confirms that under the right circumstances, a tribe may waive its sovereign immunity protections.
Posted on May 4, 2016
You do not have to be a football fan to be aware of the legal battles between NFL Commissioner Roger Goodell and the star quarterback, and perpetual winner, Tom Brady arising out of Brady’s use of deflated footballs at a playoff game. Brady won the round in district court where the judge focused on the merits of the factual case. Goodell recently won on appeal where the court of appeals focused on the fact that the NFL Players Association bargained away the right to challenge Goodell’s decisions on the merits. On appeal, it did not matter whether Brady did anything wrong. All that mattered was that Goodell thought Brady did something wrong.
In recent dealings with EPA on its model Administrative Order on Consent (“AOC”) for Remedial Investigations and Feasibility Studies (“RI/FS”), it seems EPA wants PRPs to make the same mistake the Players Association made: let EPA be judge and jury over any dispute that arises under the AOC. The most troubling language in the model is that EPA’s final decision on the dispute “becomes part of the Order.” While the vast majority of EPA folk I have met are more reasonable than Roger Goodell, RI/FS projects can involve millions of dollars, which sets the table for expensive disputes.
What is a Brady fan to do? First, the model should be changed to allow pre-enforcement review, as pointed out in a recent ACOEL post by Mark Schneider. Second, if the AOC process is otherwise desirable, there are ways to minimize the effect of the model language on at least one category of dispute: work expansion disputes, often the most serious and expensive variety of disputes. A very specific Scope of Work attached to the AOC would minimize the risk of work expansion by EPA through dispute resolution. If a dispute arises that could expand the work, do not invoke dispute resolution. Take the position that the AOC does not apply to EPA’s demand because the demand is beyond the scope of the AOC. If EPA enforces the AOC on this point you can defend without EPA’s position becoming part of the AOC beforehand. Thus, you avoid Brady’s fate—having a good argument and nowhere to go.
Posted on April 14, 2016
In the CERCLA world, the low hanging fruit has largely been picked. Long gone are the days of the run-of-the-mill $3M RI/FS leading up to a $30M RD/RA. We are getting to the tough stuff now – the megasites – and all the difficult issues related to PRP involvement in RD/RA (whether via consent decree settlement or compliance with a UAO) are on steroids.
One of those more difficult issues in the context of multi-party megasites relates to financial assurance (“FA”) requirements in RD/RA UAOs and consent decrees. The 29-page April 2015 EPA FA Guidance, while helpful on some levels, is remarkably thin (2 paragraphs) when it comes to dealing with multi-party sites. And in a breathtaking understatement, especially with regard to big-ticket sites, EPA notes in the guidance that “FA matters can get complicated with multi-PRP-led cleanups….”
Recently, added pressure has been placed on the Agency in this area as a result of a March 31, 2016 EPA Inspector General report stating that “[d]ata quality deficiencies and a lack of internal controls prevent the EPA from properly overseeing and managing its financial assurance program for RCRA and CERCLA.” In particular, EPA’s OIG analysis indicates (among other things) that there are 128 CERCLA sites with no (or expired) financial assurance in place and the estimated cleanup costs for those sites is over $3.7B.
As Proposed Plans and RODs continue to roll out from the Agency with billion-dollar-plus price tags – typically related to multi-party contaminated sediment sites – the difficulty of up-front funding of these hugely expensive remedies becomes obvious. PRPs at multi-party sites will have varying abilities and business desires to up-front fund liquid FA mechanisms, and while some entities will prefer (and be able) to provide assurance by a financial test or corporate guarantee, many will not.
And EPA’s willingness to deal with multiple mechanisms (either different mechanisms from multiple parties or multiple mechanisms from a PRP group) is limited. In fact, the use of multiple financial assurance mechanisms is discouraged under the 2015 FA Guidance. Further, the September 2014 Model Remedial Design / Remedial Action Consent Decree along with the September 2015 Model Unilateral Order for Remedial Design / Remedial Action specifically state that while PRPs may use multiple mechanisms, this can only occur with liquid mechanisms – trust funds, surety bonds guaranteeing payment or letters of credit. Interestingly, the 2014 Model CD also allows the use of insurance policies, indicating that the Agency’s thinking about the liquidity of insurance policies has evolved.
The viability of financial assurances is not simply an EPA-driven issue. Given the multi-decade cleanup process and huge stakes involved at CERCLA megasites, and with the overlay of joint and several liability, PRPs need to be thinking carefully about the financial viability of their co-PRPs when entering into CDs or PRP agreements to perform under a UAO. And regardless of how EPA ultimately decides to deal with this issue at megasites, PRPs no doubt will be pushing each other to ensure long-term equitable responsibility for meeting their FA obligations at this new breed of Superfund sites.
Posted on February 22, 2016
In my last blog entry, I advocated for the amendment of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to eliminate the bar on pre-enforcement review as one step toward improving the investigation and cleanup of sediment sites. In this entry, I propose that the U.S. Environmental Protection Agency (EPA) and potentially responsible parties (PRPs) significantly revise the dispute resolution process for EPA Administrative Settlement Agreements and Orders on Consent (“ASAOCs”) to require the resolution of disputes by neutral third parties unaffiliated with EPA or an affected PRP.
The goal of sediment remediation is to protect public health and the environment through prompt and cost-effective remedial action. Unfortunately, this goal has not been met at many sediment sites. At some sites, neither the public nor the PRPs have been served by investigations that have unnecessarily taken decades and wastefed hundreds of millions of dollars to undertake. EPA’s selection of remedies at many sites has been delayed and has not resulted in the selection of protective and cost-effective remedies.
Most sediment cleanups are performed in accordance with consent decrees, which appropriately vest dispute resolution authority in federal district court judges. In contrast, most sediment investigations are conducted under ASAOCs, which vest dispute resolution authority in EPA personnel. While many at EPA with responsibility for dispute resolution have the best of intentions and seek to be objective, the fact that they work for EPA, often supervise the EPA staff who made the decision leading to the dispute, and are often steeped in EPA practices renders most of them unable to serve in a truly independent role. To ensure fairer dispute resolution, ASAOCs should instead vest dispute resolution authority in neutral third parties with no affiliation with either EPA or the PRPs subject to the ASAOC. This would require the amendment of existing ASAOCs and the insertion of new dispute resolution language, which differs from EPA’s model language, in ASAOCs that have not yet been signed.
Additionally, while the dispute resolution official should be deferential to EPA, he or she should not rubber-stamp agency decisions, as currently is often the case. Where investigations have been mired in years of inaction, an independent dispute resolver with a fresh perspective may determine that EPA has sufficient data to make informed cleanup decisions and could compel agency action. At other sites where EPA is requiring PRPs to prepare feasibility studies advocating for remedies that almost certainly will fail, it is essential that a neutral decision-maker act independently to ensure that feasible remedies are selected.
EPA will resist any effort to revise its approach to dispute resolution, and it may require the intervention of elected officials or others to compel such a change. The public, EPA, and affected PRPs would all benefit from it.
Posted on February 22, 2016
As a private practitioner and former trial attorney at the U.S. Department of Justice, I have advocated for timely and cost-effective cleanups that protect public health and the environment. Unfortunately, only a minority of cleanups under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) have met these criteria. Of the many impediments to the thorough, prompt and cost-effective remediation of contaminated sites, and sediment sites in particular, one of the most significant is CERCLA’s bar on pre-enforcement review of the U.S. Environmental Protection Agency’s (EPA) remedial decisions. To promote more effective and timely cleanups of sediment sites, I suggest that CERCLA be amended to eliminate the current bar on pre-enforcement review. By allowing potentially responsible parties (PRPs) to seek and obtain judicial review of EPA decisions or failures to make decisions, more progress would likely be made on more sites.
CERCLA Section 113(h) states that, with limited exceptions, “No Federal court shall have jurisdiction … to review any challenges to removal or remedial action selected under section 9604 of this title, or to review any order issued under section 9606(a) of this title ….” 42 U.S.C. § 9613(h). Despite many challenges, courts have generally upheld the validity of this provision. As a result, PRPs typically cannot challenge EPA's decisions unless EPA has sought to compel performance under an enforcement order or if EPA is acting under a consent decree. As the “opportunity” for challenge may not come until years after EPA has made its cleanup decision, most PRPs are not willing to face the risk of losing a remedy challenge and the potential imposition of treble damages.
CERCLA should be amended to allow parties to challenge agency action or inaction at other times in the process, such as during the preparation of remedial investigations and feasibility studies. At many sediment sites, EPA has delayed remediation and required parties to incur hundreds of millions of dollars during investigations. If PRPs had the opportunity to obtain judicial review of agency action and inaction earlier in the process, they could seek to compel the agency to act in a way that is consistent with CERCLA’s requirements.
Having worked at the Department of Justice when CERCLA Section 113(h) was drafted, I recall my colleagues stating at the time that a bar on pre-enforcement review was necessary to avoid the challenges of having a non-expert federal judge address complex scientific questions and to prevent PRPs from tying up EPA in litigation. I offer three suggestions in response to these concerns. First, if a federal judge were confronted with a particularly complex issue, the court could appoint a special master to handle the proceedings. Second, to encourage PRPs to seek prompt resolutions, a CERCLA amendment could require PRPs to fully comply with an agency’s directives pending resolution of the judicial dispute and impose a penalty on those parties whose challenge of agency action was unsuccessful. Third, agencies could seek an expedited hearing of disputed issues.
While it is very unlikely that Congress would consider a CERCLA amendment to address only this issue, PRPs should raise this issue the next time amendments are being considered. It will succeed only through the concerted efforts of advocates who seek more and better cleanups and those who seek prompt and reasonable government decision-making.
Posted on December 22, 2015
Mark Twain once wisely warned:
We should be careful to get out of an experience only the wisdom that is in it -- and stop there; lest we be like the cat that sits on a hot stove‑lid. She will never sit on a hot stove-lid again -- and that is well; but also she will never sit down on a cold one any more.
While trying to clear the collapsed entrance to the inactive Gold King Mine in Colorado, EPA contractors in August 2015 inadvertently released over 3 million gallons of metal-laden wastewater into a tributary of the Animas River. Partly because of EPA’s involvement, and partly because high iron levels turned the Animas River orange for several days, the incident generated considerable controversy and attention.
Subsequent views about what we should learn and do as a result of this spill have been quite divergent and, in this writer’s view, off the mark.
As might be expected during this election season, one response was protracted administration-bashing Congressional hearings, aimed at the heads of both EPA (criticizing the Agency for not better controlling its contractor at this remote mountain site) and the Department of the Interior (which has no responsibility for the site but issued a requested report on the spill). Not surprisingly, these blame-and-shame hearings were not focused on, and did not produce, constructive information or plans for preventing such events in the future. However, they did cause EPA remedial efforts and related U.S. transactions at inactive mine sites to be put on hold, which was counter-productive for dealing with this problem.
At the other extreme, some environmental advocates have asserted that this wastewater release from an inactive mine supports their view that U.S. mining law should be fundamentally overhauled, including to provide for substantial royalty payments to the government and imposition of major financial assurance requirements on miners under CERCLA Section 108. Those calls ignore the fact that this historic site pre-dates subsequently adopted mine reclamation and bonding requirements imposed on current mines under state and federal law. They also represent a sea-change in mining law that goes far beyond this inactive mine issue, would occur at a difficult economic time for the mining industry, and is unlikely to gain traction in this polarized political climate.
Congressional reactions reflect those widely disparate positions, with new proposed bills ranging from a narrow proposal for grants to mining colleges to study the problem (H.R. 3734) to a broad mining reform act that imposes substantial new fees and royalties (H.R. 963). One other proposed bill would freeze DOI’s Abandoned Mine Lands (AML) Program at $17 million per year and institute a “Good Samaritan” program to encourage third-party volunteer clean-ups at AMLs (H.R. 3843), and another would create a foundation to accept donations for AML cleanups, with one-time matches from the federal government of up to $3 million per year (H.R. 3844).
Many of these proposals are either political posturing or over-reaching, and others do not focus on or effectively address the problem of abandoned mines. Moreover, they either are unlikely to go anywhere in Congress, or would accomplish little if they do.
However, there are effective steps we should take if we learn the following key lessons provided by the Gold King spill:
· There are tens of thousands of abandoned mines like Gold King that are already discharging polluted wastewater to thousands of miles of streams. If we do nothing, such discharges will continue and worsen, and occasional blow-out releases like Gold King are inevitable.
· The damage and economic impacts caused by these abandoned mine sites are real and will increase.
· These mine sites are very complex and expensive to fix.
· Some states and volunteer entities are willing to address these sites if existing liability disincentives can be removed.
Given these circumstances, we should focus on practical approaches that will achieve real, near-term, on-the-ground remedial actions. Furthermore, the approaches must be backed by meaningful sources of funding, and be politically achievable in the current, polarized political climate.
A good start would be adopting an effective “Good Samaritan” law addressing the existing disincentives for third parties to remediate abandoned and inactive mine sites, coupled with meaningful federal funding initiatives. The Keystone Policy Center is currently working to achieve consensus on such an approach.
A second practical approach would be to use CERCLA National Priority List (NPL) designation at select sites to provide funding where no viable mine operators remain. The Gold King incident has served as a catalyst for removing past local opposition to NPL listing for the upper Animas River drainage. That’s a good beginning.
We should heed Twain’s advice and use the real lessons of Gold King to move beyond politics and take practical steps like those noted above to start fixing these old mine sites. And we should stop getting mired in the same, currently dead-end debates that lead to doing nothing and can be put aside for another day – lest we be like the cat that will never sit on a cold stove-lid.
Posted on November 2, 2015
According to the Daily Environment Report (subscription required), EPA is going to change the name of the Office of Solid Waste and Emergency Response to the Office of Land and Emergency Management. What a grand name; surely it is an improvement.
I don’t think that this quite rises to the level of rearranging deck chairs on the Titanic (though I certainly have clients who would not object if OSWER sank without a trace), but one does get the sense of a bureaucracy beginning the long, hard, slog of trying to figure out how to perpetuate its existence as Superfund – mercifully – begins to fade away.
It’s probably a vain hope, but mightn’t EPA determine instead how to reallocate those functions of OSWER that need to continue, but actually try to figure out a way to shrink this element of the bureaucracy, instead of repurposing it?
Posted on October 26, 2015
The Environmental Protection Agency has released a framework for its future financial responsibility rulemaking under CERCLA 108(b). Although this framework states EPA’s current thinking only in general terms, this document represents the clearest public statement of the agency’s intentions since it announced its intention to develop such rules for hardrock mining facilities in 2009. This framework also informs of EPA’s intentions toward other classes of facilities in future rulemakings under this authority. This framework appeared as part of a court filing on August 31, 2015 and was the subject of an EPA webinar on September 29, 2015.
EPA states that the regulatory approach it is considering has five foundational components. First, the universe of facilities to be regulated are hardrock mines and “primary processing activities located at or near the mine site that are under the same operational control as the mine.” Second, the flow of funds from the financial responsibility instrument to the CERCLA would supplement existing CERCLA sources of funding, as EPA intends to use its existing CERCLA enforcement processes first to clean up sites. Third, the scope and amount of financial responsibility would consist of three components: (1) response costs, calculated based on a model being developed by EPA to reflect the primary site conditions; (2) a fixed amount for natural resource damages and (3) a fixed amount for health assessment costs.
Fourth, EPA does not intend to preempt state, tribal and local government mining and reclamation closure requirements. EPA intends to avoid preemption under CERCLA 114(d) by adopting financial responsibility requirements that are “in connection with liability for a release of a hazardous substance” in contrast to “many” state regulatory requirements designed to assure compliance with reclamation and closure requirements. Fifth, EPA likewise intends that its CERCLA financial responsibility requirements will be distinct from federal closure and reclamation bonding requirements imposed by other federal agencies under other laws with jurisdiction over mining on federal lands.
The morsel of information provided in EPA’s framework leaves interested parties hungry for more information by what is left unsaid. Particular concerns are the response cost model and its inputs and the path that EPA intends to tread around the multitude of existing financial assurance mechanisms that already apply to hardrock mining to avoid duplication and preemption. In this regard, EPA could not have picked a more difficult place to begin drafting CERCLA 108(b) rules than for this industry, which has in place many and extensive financial assurances governing the impact of its operations.
Posted on August 7, 2015
Earlier this year, I posted in this blog a discussion of EPA’s 35 year – and still unfinished – journey toward full implementation of the financial assurance (“FA”) mandate of CERCLA Section 108(b). Section 108(b) obligates EPA to identify “classes of facilities” that will be required to demonstrate financial ability to respond to future releases of hazardous substances and to promulgate rules establishing those FA requirements. Inexplicably, Section 108(b) remained dormant for 28 years. Litigation initiated by NGOs in 2009 and 2010 prompted the agency to identify the hardrock mining and several other industries as priority targets for regulation. The task of developing the FA requirements for those industries, however, remained a work-in-progress.
Ever vigilant, environmental advocacy groups filed a Petition for Writ of Mandamus in August 2014 taking EPA to task for its delays and inaction. The theme of the litigation is that (1) Section 108(b) is a critical component of CERCLA’s overall scheme, (2) EPA’s failure to issue FA rules has resulted in cleanup delays, funding shortfalls and increased public health risks, and (3) EPA’s inaction cannot be justified by competing priorities within the agency. In May of this year, the D.C. Circuit Court of Appeals issued an order requiring EPA to expedite implementation of Section 108(b) to the greatest extent possible, update its rulemaking schedule for the identified industries, and disclose to the litigants the regulatory “framework” for the hardrock mining industry, which EPA acknowledged had been completed. EPA’s website suggests that it will publish the hardrock mining rule in August 2016.
In short—the more things change, the more they stay the same. Perhaps the low priority assigned to this CERCLA provision suggests that the cleanup response track-record of even the priority industries may not justify a need to regulate under Section 108(b) - a process that will involve complex issues with significant financial consequences. Nevertheless, Section 108(b) remains the law of the land. Congress must either follow-through with its periodic efforts to amend Section 108(b) or EPA must finish this long journey. No benefit inures to the public, affected industries or the agency from the existing uncertainties and delays.
EPA’s foot-dragging in implementing Section 108(b) is in contrast with its recent action emphasizing FA as an enforcement priority in CERCLA settlement agreements and UAOs. The agency’s April 2015 Guidance to Regional Counsel is touted as the first comprehensive document issued by EPA to assist with the development of FA requirements and provide transparency in the use of its Superfund authority. Space limitations do not permit a detailed review of this 22 page guidance, which includes modified model FA language and sample documents. Some take-aways from a first read of the guidance:
- The Guidance does not address future Section 108(b) requirements.
- It is suggested that the EPA Regions have flexibility to include or exclude certain FA mechanisms at specific sites, BUT headquarters consultation and approval is often necessary.
- The financial test and corporate guaranty mechanisms are perceived by EPA as having a higher risk of not achieving FA objectives and imposing increased administrative burdens on the Agency; therefore, it is suggested that those mechanisms should be used with caution.
- The Guidance recognizes the complications arising at sites involving numerous, dissimilar PRPs, with a preference for requiring jointly-funded versus separate FA mechanisms.
- The Guidance emphasizes the need for agency diligence in the ongoing evaluation of site conditions and costs, with increases in the initial FA amount to be required as appropriate.
- Practical considerations for evaluating the financial test and guaranty FA options are addressed in an appendix.
Notwithstanding suggestions of flexibility in the use of FA tools on a site-by-site basis, this comprehensive new guidance does not appear to include much good news for the settling PRP. In fact, EPA’s stated concerns on the use of the financial test, corporate guaranty and insurance policy FA mechanisms could further complicate an already contentious issue in CERCLA settlement negotiations. What impact the guidance may have on FA negotiations as new sites arise, of course, remains to be seen.
Posted on April 29, 2015
A plaintiff seeking to characterize a business transaction as “disposal” under CERCLA may now feel like a polar bear looking for a patch of thick ice.
On March 20, 2015, a divided panel on the Fourth Circuit Court of Appeals, in Consolidation Coal Co. v. Ga. Power Co., affirmed a District Court's ruling holding that transformer sales did not evidence an intent on to dispose of hazardous materials, and therefore did not support a finding of “arranger liability” under “CERCLA” even when words like “scrapping” and “disposal” were used. Looking to the framework of the Supreme Court’s 2009 ruling in Burlington Northern Burlington Northern and Santa Fe Railway Co. v. United States and the Fourth Circuit’s 1998 ruling in Pneumo Abex Corp. v. High Point, Thomasville & Denton Railroad Co., the 2-1 majority held that while a party who sells a product that contains hazardous substances also “‘intends’ to rid itself of that hazardous substance in some metaphysical sense… [an] intent to sell a product that happens to contain a hazardous substance is not equivalent to intent to dispose of a hazardous substance under CERCLA.” Rather, in the court’s words, “there must be something more.”
Georgia Power, a major Georgia electrical utility that supplies power to most of Georgia, sold used electrical transformers containing PCBs to Ward Transformer Company. Ward repaired and rebuilt used transformers for resale. In the process, Ward’s Raleigh, North Carolina, facility became contaminated with PCBs. After the Ward site was added to the National Priorities list, Consolidated Coal Company and another company bore most of the cleanup costs as PRPs under CERCLA, spending approximately $17 million each in cleanup costs.
Any attorney who has ever tried or been involved with a CERCLA case knows that Georgia Power, given these facts, looks like a prime target to sue for contribution.
In their appeal to the Fourth Circuit Court of Appeals, Consolidated Coal argued the District Court improperly considered the low value of the used transformers and Ward’s ability to profit from their resale. This, Consolidated Coal contended, overlooks the possibility that Georgia Power had a “dual intent” to make money from the sales of transformers and thus had an intent to dispose of the hazardous materials as an arranger. Thus, according to Consolidated Coal, Georgia Power’s “secondary motive” for the transformer sales -- to dispose of PCBs –- was sufficient to create arranger liability under CERCLA.
The Court concluded that there was no direct or substantial evidence that Georgia Power intended, “even in part,” to arrange for disposal. Furthermore, the use of the words “scrapping” or “disposal” in Georgia Power’s documents had “limited bearing” on their intent to “dispose” of transformers as the word is construed in CERCLA, let alone the PCBs within those transformers. The Court was also not swayed by the fact that the transformers were sold in lots and that some of the transformers were partially disassembled, or that old oil was required to be removed from the transformer as part of the reconditioning process. According to the Court, all Georgia Power did was to sell its transformers to the highest bidder.
While these cases remain fact sensitive, the trend lines suggest CERCLA plaintiffs alleging “disposal” may be on thin ice.
Posted on January 26, 2015
The Fifth Circuit has just weighed in with a significant interpretation of the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). In a case involving “arranger” liability under CERCLA (the Comprehensive Environmental Response, Compensation and Liability Act), the Fifth Circuit on January 14 overturned a district court judgment that had held BorgWarner liable for leaks of perchloroethylene (PERC) from equipment sold by an affiliate of BorgWarner’s corporate predecessor. Vine Street LLC v. Borg Warner Corp., No. 07-40440 (Jan. 14, 2015).
The Fifth Circuit held there was no “intent” to dispose of PERC even though the dry cleaning equipment was designed with the knowledge that some PERC would inevitably be mixed in with the water that the system was designed to discharge. Because PERC was a useful product and the intent was to reclaim it rather than dispose of it, the Fifth Circuit strictly applied Burlington Northern’s holding that arranger liability requires an intent to dispose and remanded the case to the district court with instructions to enter judgment in favor of BorgWarner.
Vine Street usurps the Fifth Circuit’s earlier “nexus” test (the test in effect when the District Court issued its ruling), which was based on a totality of the circumstances, and gives further ammunition to those defending against CERCLA liability for releases incidental to the sale of a useful product.
Posted on January 9, 2015
While Congress designed CERCLA to enhance EPA’s ability to respond to hazardous contamination, the statute requires a level of cooperation between federal and state authorities for certain CERCLA activities, including the NPL listing process. But like parents forcing middle-schoolers to dance in etiquette class, Congress’s efforts to make EPA coordinate with States often begins with squabbles over who leads and ends with squashed toes.
So how much state involvement is required under CERCLA? More than you might think. For example, CERCLA section 121(f) states that EPA must provide “for substantial and meaningful involvement” by each State in the “initiation, development, and selection of remedial actions to be undertaken in that State.” This includes state involvement in decisions whether to perform preliminary assessments and site inspections, allocation of responsibility for hazardous ranking system scoring, negotiations with potentially responsible parties, and participation in long-term planning processes for sites within the State. CERCLA section 104(c)(3) mandates that before EPA can provide a Superfund remedial action in a particular State, the State must provide EPA with specified assurances in writing. Those assurances include the State’s agreeing to undertake “all future maintenance of the removal and remedial actions provided for the expected life of such actions” and paying “10 per centum of the costs of the remedial action, including all future maintenance.” These statutory provisions are confirmed and enhanced by EPA’s own regulations. See, e.g., 40 C.F.R. 300.500; id. at 300.510. Further, two EPA guidance memoranda outline a process “to include State input in NPL listing decisions” and to resolve disputes “in cases where [an EPA] Regional Office . . . recommends proposing or placing a site on the [NPL], but the State . . . opposes listing the site.” See Memo. from Elliot P. Laws, Asst. Admin. EPA Off. of Solid Waste and Emergency Response (“OSWER”), to EPA Reg. Admins., at 1 (Nov 14, 1996); Memo. from Timothy Fields, Jr., Asst. Admin. OSWER, to EPA Reg. Admins., at 1 (July 5, 1997) (Fields Memo.). This policy requires EPA regional offices to “determine the position of the State on sites that EPA is considering for NPL listing . . . as early in the site assessment process as practical,” to “work closely with the State to try to resolve [any] issue[s],” and to provide the State with “the opportunity to present its opposing position in writing” before EPA Headquarters “decide[s] whether to pursue NPL listing.” Fields Memo. at 2.
EPA has historically taken these laws, rules, and guidance to heart, consciously trying to avoid stepping on state feet in the NPL listing process. Of the over 200 sites that EPA has proposed for listing since 1995, only the Fox River Site in Wisconsin was proposed over state opposition—and that listing was never finalized. EPA’s deference makes sense considering that a failure to obtain state assurances generally means EPA cannot access the Superfund to finance its remedial activities. Unfortunately, there are signs EPA’s cooperative approach may be changing. EPA recently proposed the 35th Avenue site in Birmingham, Alabama, for NPL listing without Alabama’s concurrence. While EPA claims state support for the listing (79 Fed. Reg. 56,538, 56,544 (Sept. 22, 2014)), the rulemaking docket contains letters of opposition from both the Alabama Department of Environmental Management and the Alabama Attorney General. Alabama has made clear that it has no ability to fund any remedial efforts at the site, and has no intention of providing any of the required assurances. Moreover, EPA did not follow its own guidance regarding the “nonconcurrence” dispute. In short, while EPA and Alabama are facing one another, EPA may have shown up to this dance wearing jackboots.
Posted on January 7, 2015
Much of my legal work deals with hazardous material remediations driven by CERCLA or state equivalents. The allocation of these costs among liable parties, in court or out, is generally conceded to be expensive and ultimately unsatisfying to most of them. I never thought I would see it in another area of environmental law but now I have.
Dams are regulated in my state by the New Jersey Department of Environmental Protection. It is a big job. Most of our lakes and ponds are dammed streams or rivers. At one point New Jersey had 196 dams where a failure might result in probable loss of life and/or extensive property damage. 50 of these need repairs at an estimated cost in excess of $33 million. There were also another 396 dams where failure might result in significant property damage. 317 are in need of repair to bring them up to state standards at a cost in excess of $126 million. Who pays for the necessary repairs to these dams and how?
A case decided by our intermediate appellate court on January 2nd of this year answers this question in a most CERCLA-like way. In New Jersey Department of Environmental Protection v. Alloway Township the Appellate Division interpreted provisions of the Safe Dam Act (N.J.S.A. 58:4-1 to 4-14). This Act “casts a ‘broad net’ of liability … so that its remedial purpose … is served” by imposing “significant obligations” on the owner or person having control of a reservoir or dam. At issue in this case was a privately owned lake created by an earthen dam that now has township road on top which is supported by a county bridge and culverts that are part of the dam.
The New Jersey Department of Environmental Protection (“NJDEP”) brought an action against the person owning the property below the lake and the dam, the township that maintained the road on the dam and the county that maintained portions of the dam. The court held “there are four classes of people who are subject to the statute: (1) dam owners; (2) reservoir owners; (3) those who control the dam; and (4) those who control the reservoir. It follows that if a party fits into any one of those categories, the [NJDEP] may seek enforcement of the SDA against that person.” All the parties fell into at least one of those classes.
The Appellate Division also blessed the allocation of liability made below. There, the judge, sitting in the Chancery Division - General Equity Part, made an equitable allocation of the costs of compliance: sixty-five percent to the County, twenty-five percent to the property owner, and ten percent to the Township.
What – equitable allocation in another environmental program? Cheer up CERCLA lawyers. Our skills may be useful in dam regulatory litigation.
Posted on November 19, 2014
DEFENSE TO JOINT AND SEVERAL LIABILITY
On September 25, 2014, the Seventh Circuit added two more opinions to the long list of decisions arising out of the Lower Fox River and Green Bay Superfund Site (Fox River Site) in northeastern Wisconsin.
In NCR Corp. v. George A. Whiting Paper Co., a contribution suit, the court reversed and remanded a decision by the Eastern District of Wisconsin, which had held that NCR was not entitled to any contribution from the other defendants.
In U.S. v. P.H. Glatfelter Co. (Glatfelter), an enforcement action, the court ruled on a number of important CERCLA issues, such as whether a permanent injunction can be issued to enforce a Section 106 unilateral administrative order. In affirming in part and reversing in part the same District Court decision, the Seventh Circuit provided the latest appellate guidance on the divisibility of harm defense to joint and several liability.
The District Court had rejected divisibility of harm defenses raised by defendants NCR and Glatfelter, ruling, as a matter of law, that the “harm” in one of the operable units of the Fox River Site (OU-4) was not “theoretically” capable of being divided. The District Court ruling thereby avoided the second step of the divisibility of harm analysis, the factual question of how a divisible harm might be apportioned. That was the question resolved by the Supreme Court in Burlington N. & Santa Fe R.R. Co. v. United States (Burlington Northern), a decision which gave Superfund practitioners great hope because the apportionment approved by the Court was so imprecise. Litigation in the lower courts following Burlington Northern quickly turned to the question of what makes a harm “theoretically” capable of being divided. The question is whether it is possible to approximate the contamination caused by each party.
In the District Court, defendants NCR and Glatfelter argued for divisibility of harm on different theories. NCR admitted that it had contributed to the contamination in OU-4, but argued that the harm was capable of apportionment and that it should be liable only for its apportioned share of the costs. Glatfelter argued that it did not cause any of the contamination in OU-4 and therefore was not liable for the costs of cleaning up OU-4.
As to NCR, the Seventh Circuit first addressed the question of what the appropriate metric should be for measuring the contamination caused by each party. The District Court, after a lengthy trial, had viewed the harm as “binary,” in the sense that contamination in concentrations above EPA’s maximum safety threshold of 1.0 ppm of PCBs was harmful; whereas, concentrations below that level were not. The Seventh Circuit rejected that “on-off switch” approach on the ground that the evidence at trial had shown that the dividing line between “harmfulness and geniality” was much more subtle. The Seventh Circuit reviewed the various metrics used by EPA to measure harm and settled on “surface weighted average concentrations” (SWAC) of 0.25 ppm throughout OU-4 as the appropriate value. Even that value, however, could not be viewed as “binary,” according to the Seventh Circuit , because lesser concentrations still could pose risks of harm.
This analysis led the Seventh Circuit to reconsider whether remediation costs can be a useful approximation of the contamination caused by each party. The District Court had concluded that, like contamination levels, remediation costs were “binary” in the sense that “sediment with PCB concentrations below 1.0 ppm would impose no remediation costs, while sediment with PCB concentrations above 1.0 ppm would always impose about the same remediation costs.” The Seventh Circuit said “[w]e think the district court got this wrong as well.” Instead, “remediation costs increase with the degree of contamination above 1.0 ppm. As a result, remediation costs are still a useful approximation of the degree of contamination caused by each party.” As the Seventh Circuit explained, that is so because “the cost of the remedial approach in a particular area is positively correlated with the level of contamination near the surface of that area, which contributes to the operable unit’s SWAC, and consequently, the harm.”
The Seventh Circuit concluded:
As a result, we think the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4. And if NCR cleared that hurdle, we think a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
The Seventh Circuit then went on to agree with the District Court’s critique of expert opinion offered by NCR to estimate the percentage of mass it contributed to OU-4, but faulted the District Court for failing to explain why it rejected an alternative approach to estimating mass-percentages. The Seventh Circuit did not say whether the estimated mass-percentages, if properly done, would have proven that the harm in OU-4 was “theoretically” capable of apportionment. Instead, the Seventh Circuit reversed the District Court’s rejection of the divisibility defense and remanded for further fact finding.
As to Glatfelter, the Seventh Circuit characterized its divisibility argument as an “all-or-nothing game,” in the sense that Glatfelter argued that none of its PCBs made their way into OU-4, obviating the need, in Glatfelter’s view, to approximate its share of the PCB contamination in OU-4. The Seventh Circuit thoroughly analyzed the testimony of Glatfelter’s expert (to the point of proposing complex algebraic formulas to demonstrate his testimony was unsound), concluding “Glatfelter failed to prove that the PCB discharges for which it is responsible were not a sufficient, or at least a necessary cause of at least some of the contamination in OU-4. Therefore, the district court correctly ruled against Glatfelter on its all-or-nothing divisibility defense.”
So what do Superfund practitioners learn from Glatfelter? Some things we already understood are confirmed. Divisibility analysis is a two step process; the initial and far more challenging step is to prove that the harm is “theoretically” capable of apportionment. The burden of proof on that issue rests with a defendant advancing a divisibility of harm defense. Glatfelter now instructs that the test to determine whether a harm is theoretically capable of apportionment depends upon the extent to which the defendant contributed to concentrations of contaminants at the site, an obvious subject for expert testimony. The battle on that issue can be expected to resume in the District Court. To the extent the first step is cleared, a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
More than theoretical is the fact the Fox River Site will produce more opinions for guidance to Superfund practitioners in this confusing and difficult area of the law.
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on September 23, 2014
Financial responsibility is a familiar environmental law concept. Many of us have negotiated financial assurance provisions in site consent agreements. RCRA’s closure and post-closure financial responsibility requirements at treatment, storage and disposal (TSD) facilities are well-established. Financial responsibility obligations are also a component of many other federal and state environmental programs.
I suspect, however, that few practitioners are aware of a CERCLA financial responsibility provision that has been in existence since the Act’s inception. CERCLA Section 108(b) mandates that the President identify classes of facilities that will be required to demonstrate a financial ability to cleanup releases of hazardous substances. These facilities will be obligated to provide evidence of financial responsibility that is consistent with the degree and duration of the risks associated with their production, handling, treatment, storage and disposal of hazardous substances. The requirements of Section 108(b) are intended to assure availability of funds should the businesses go bankrupt or otherwise become financially unable to conduct future environmental response actions.
Section 108(b) generally imposes two regulatory tasks on EPA: Identify the classes of facilities for which financial responsibility requirements will be developed and promulgate regulations establishing those requirements. For twenty-eight years, EPA deferred breathing regulatory life into Section 108(b). EPA’s inattention to Section 108(b) ceased to be an option in 2008. Litigation commenced by the Sierra Club and others resulted in a federal court order requiring EPA to identify industries that would be first in line for Section 108(b) rulemaking. EPA determined in 2009 that the hard rock mining industry would be its first priority. In early 2010, EPA published advance notice of its intent to regulate additional classes of Section 108(b) facilities: chemical manufacturing, petroleum and coal products manufacturing and the electric power generation, transmission and distribution industry.
Although deadlines have come and gone, to date no financial responsibility rules have been proposed. Nevertheless, the lifeless form of Section 108(b) has finally begun to stir. EPA advised Senate lawmakers in June of this year that financial responsibility requirements for the hard rock mining industry would be issued by 2016. In the meantime, the NGOs remain ever vigilant. Armed with data indicating that, particularly during the recent recession, taxpayers and disadvantaged communities suffered the adverse consequences of EPA’s inaction, environmental advocacy groups filed a Petition for Writ of Mandamus demanding that the agency promptly comply with Section 108(b)’s rulemaking requirements. In contrast, many industry groups contended that the Section 108(b) rulemaking being developed is based on a flawed analysis of potential risk and ignores the impact of existing state and federal financial responsibility laws and regulations that have achieved most of the objectives of Section 108(b). Legislation introduced in the House of Representatives in 2013, generally supported by the affected industries, included significant amendments to CERCLA Sections 108(b) and 114(d).
Whether you believe that Section 108(b) is outdated and unnecessary, or that immediate and comprehensive implementation of its mandates is of paramount importance, I would submit that EPA’s seemingly cautious approach to Section 108(b) rulemaking is justifiable. Considering the financial consequences, the identification of target industries must be based on a careful and comprehensive evaluation of the actual risks associated with a particular industry’s handling of hazardous substances and the historic “track-record” of that industry’s ability to financially respond to releases. The extent to which existing federal and state financial assurance programs address the identified risks must also be carefully scrutinized to avoid unnecessary cost and duplication. EPA’s selection of acceptable financial assurance mechanisms is also of critical importance. Elimination of the so-called “financial test” method, for example, may impact the capacity of financial and credit markets to provide the necessary financial assurance and adversely affect global competitiveness.
Future rulemaking that is based on a thorough and defensible analysis of actual risk and is limited to filling in any gaps in existing financial assurance programs will best serve the public, the environment and the regulated community.
Posted on July 30, 2014
More than thirty years after the enactment of CERCLA, basic questions relating to the liability provisions remain. These issues can become critical when attempting to apply the limitation periods set out in the statute. One of the unsettled questions is whether an Administrative Order on Consent (AOC) can give rise to the Section 107 cost recovery claim, or are the potential plaintiffs limited to a claim for contribution under Section 113. This question can loom large when trying to determine the applicable limitations period because a three-year statute of limitations applies to contribution claims, as opposed to the usually more generous limitations periods – three years for removal actions and six years for remedial actions -- provided for Section 107 cost recovery claims.
The Supreme Court has addressed the relationship between Section 107 cost recovery claims and Section 113 contribution claims in two cases: Aviall Servs., Inc. v. Cooper Indus. and U.S. v. Atl. Research Corp. In Aviall, the Court held that a Section 113(f) contribution action can only be brought during or following a suit under CERCLA Sections 106 or 107, or after liability is resolved in an administrative or judicially approved settlement. In Atl. Research, the Court held any party, including a potentially responsible party (PRP), may bring a Section 107 action to recover cleanup costs but observed that Sections 107 and 113 provided distinct causes of actions that were available to PRPs depending on whether they were seeking recovery or contribution. The Court noted that it was deciding the question of whether compelled costs of response can be recovered under Section 107(a), Section 113(f), or both.
Since Atl. Research, circuit courts have not allowed cost recovery claims when a contribution claim is available. This issue was addressed recently by the Sixth Circuit Court of Appeals in Hobart Corp. v. Waste Mgmt. of Ohio. More specifically, the court considered whether the plaintiff was limited to a claim for contribution – and thus subject to the three-year limitations period – because it had entered into an AOC to prepare the Remedial Investigation/Feasibility Study. Following the lead of other circuit courts, the Sixth Circuit declined to apply a bright-line test but focused on whether under the AOC the plaintiff had resolved its liability to the government for some or all of the response costs. If so, then recovery was limited to a contribution action under Section 113. The court held the AOC had resolved the plaintiff’s liability and called attention to three specific provisions in the AOC: the release was operative upon the effective date of the AOC, contribution protection was available as of the effective date of the AOC, and the effective date was the date that the AOC was signed (rather than the date of the completion of the work).
Hobart is another reminder that litigants must evaluate their case very carefully before they assume they will have a Section 107 claim for costs incurred to satisfy the terms of an AOC. At this point, it seems clear that for many AOCs, the only available claim will be one for contribution, especially when the terms of the AOC foreclose further adjudication of legal liability. But the courts have taken on this issue on a case-by-case basis. There may be some cases, as in ITT Industries v. BorgWarner, Inc., where the AOC is found not to be a “settlement” under Section 113(f) and a cost recovery claim may exist. But until there is further guidance from the Supreme Court, the safest approach is likely to be to assume that only a Section 113 contribution claim is available to recover costs incurred under an AOC.
Posted on June 19, 2014
On June 9th, the Supreme Court ruled, in CTS Corp. v. Waldburger, that § 309 of CERCLA does not preempt state statutes of repose. Section 309 requires state statutes of limitations for injuries from hazardous substances releases to run from the date the plaintiff knew or should have known of the injury caused by the release. But in CTS, the Court held that state statutes of repose are not statutes of limitations, and are not governed by section 309.
That conclusion was hardly self-evident. While section 309 explicitly applies to statutes of limitation, and does not specifically mention statutes of repose, the later have often been understood as a species of the former. When section 309 was enacted, Black’s Law Dictionary explained that “Statutes of limitations are statutes of repose.” Congress itself often referred to statutes of repose as “statutes of limitation.” And the very year after Congress enacted section 309, the Supreme Court itself described application of a two-year state statute of limitations as “wholly consistent with . . . the general purposes of statutes of repose.” The meaning of these terms has diverged in more recent years, but that divergence was not well-established when Congress enacted section 309.
The Court’s conclusion that Congress recognized a clear distinction between statutes of limitation and statutes of repose thus required the Court to assume that Congress used these terms with more precision in section 309 than Congress had done on other occasions, with more precision than (and in conflict with) the then-current edition of Black’s, and with more precision then the Supreme Court itself used the terms a year later. It is not often that this Court holds Congress’s legal acumen in such high regard.
The Court’s lead argument for why Congress did understand this distinction was that page 256 of the Section 301(e) Study Group Report—an expert report submitted to Congress and referenced in the Conference Committee Report—distinguished between these terms. This is surprising analysis. The CTS majority includes avowed skeptics of relying on traditional legislative history. Those justices might previously have been expected to be even more skeptical of attempts to discern congressional intent from statements buried in expert reports referenced by traditional legislative history. Not so, it seems—or at least, not so for this one opinion.
But does the Study Group Report even make the same distinction as the Court? The report recommends that:
"states . . . remove unreasonable procedural and other barriers to recovery in court action for personal injuries resulting from exposure to hazardous waste, including rules relating to the time of accrual of actions."
The Report then recommends that “all states that have not already done so, clearly adopt the rule that an action accrues when the plaintiff discovers or should have discovered the injury or disease and its cause.” That is what Congress effectively did—albeit for the states—in section 309. The Report then states: “This Recommendation is intended also to cover the repeal of statutes of repose which, in a number of states have the same effect as some statutes of limitation.”
This sentence, the Court concludes, shows that Congress must have known that a law that preempts state statutes of limitation would not also preempt state statutes of repose. But is it not at least as likely that any Member of Congress who actually read page 256 of the Study Group Report would have thought that adopting the discovery rule for all states would “also … cover the repeal of statutes of repose”?
Justice Scalia once wrote that “Congress can enact foolish statutes as well as wise ones, and it is not for the courts to decide which is which and rewrite the former.” Reading CTS Corp., one cannot escape the notion that the Court was willing to stretch its usual interpretive rules in order to apply what it considered a wise result to an arguably ambiguous statute. It did so in the apparent service of the policy of repose. But the holding will bring little peace in a state with a statute of repose to individuals who learn, years too late, that they or their children have been sickened by contaminants that a government agency or business released long ago.
Posted on May 20, 2014
The old adage, jokingly told by my college Economics 101 prof, that “economics is not a science but rather a black art”, is amply borne out by disputes between warring factions of resource economists that are playing out in ground water contamination natural resource damages litigation in New Jersey, Puerto Rico, and elsewhere. The issue: how to value contaminated ground water. So far, the few courts that have actually looked at this issue have been skeptical of the “creative” economics propounded largely by the plaintiff bar.
In one corner, we have the classical economists, usually retained by the defendants’ bar, who argue that ground water must be valued based on the impairment of an economic use, such as potable fresh water that could otherwise be consumed or ground water that could otherwise be used for crop irrigation or for industrial process uses. They call this “use value.” Let’s say that we have a facility that contaminates ground water that is naturally salty, does not meet the federal SDWA secondary drinking water standards, and is not migrating beneath anybody else’s property, or generally any ground water that is not impacting any offsite user. These economists argue that this water should not be valued for its loss as potential drinking water or other uses and thus the cost of replacing it should not be considered, leaving the monetary resource value of this water to be zero.
In the other corner we have the “creative” guys, typically retained by plaintiffs. They advance several theories upon which to predicate large monetary values for contaminated, but unused and unusable, ground water. Here are three:
Benefits Transfer: Under this theory, clean ground water has an inherent “value” to people, called by its proponents “existence value” and thus whether it is used or not, or anybody suffers actual harm or not, is irrelevant. The proponents of this theory rely on several, mostly old, studies in which groups of people were asked what they would pay to have assurance that their own ground water supply would be free of contamination. For example, would they contribute to the cost to construct a treatment facility? These economists then use an algorithm to calculate a per-gallon “value” of the contaminated ground water using the monetary values derived from those studies. This approach ignores real-world concepts of economic value, substituting for it a sort of fictional “gestalt” value.
Resource Equivalency Analysis: This approach borrows from techniques appropriately used to value damaged wetlands or plant or animal habitat. Its proponents also assume that ground water has inherent economic (“existence”) value. They first calculate the volume of contaminated groundwater over time, and attempt to determine what it would cost to purchase an amount of land sufficient to “protect” an equivalent volume of ground water elsewhere in perpetuity. Although this approach works for habitats, it has all kinds of problems when applied to ground water. For example, in one recent case the economist’s “equivalent” resource was a fresh water aquifer, which he was projecting as equivalent to a saline portion of the same aquifer, ignoring the fundamental meaning of the word “equivalency.” Additionally, protecting ground water resources by preserving land also provides extraneous environmental benefits — such as providing habitat — which the theory seems to ignore. Furthermore, it is very difficult to determine appropriate land values.
Wasteful Use: This is my favorite. In a pending litigation, a plaintiff economist named Kevin Boyle asserted that extracting contaminated seaside ground water from beneath an industrial facility, treating it to remove contaminants pursuant to a RCRA corrective action permit, and discharging the treated water to the ocean, constitutes a “wasteful use” of the extracted ground water. His argument was premised on returning the treated water to the aquifer and thus making it available for use, instead of discharging the water to the ocean. But the aquifer in question was naturally salty, on the edge of the ocean, naturally flowed out under the ocean, and the recharge area would have been entirely within the property of the industrial defendant. He calculated his “wasteful use” value as the per gallon rack price of an equivalent volume of desalinated water sold to the public by the local water utility.
Stay tuned, sports fans. Surely more to come.